One of the most difficult financial decisions seniors will make in retirement is how to balance their investment portfolio so that it offers a healthy dose of income potential while minimizing risk to their principal. Dividend stocks with 10%-plus yields might seem tempting, but in more cases than not, those yields aren’t sustainable, meaning they’re often not a great choice for retirees. Then again, raking in around 1% with a Treasury bond is equally unappealing.

The good news is retirees have ample choices when it comes to dividend stocks. On a trailing 12-month basis, better than 40% of all publicly traded stocks paid a dividend to shareholders. (Admittedly, this also includes one-time dividends that may not be recurring.) Some of the most sought-after income stocks tend to be America’s largest companies and industry leaders. This would certainly make sense given that industry leaders usually have sustainable competitive advantages that lead to healthy cash flows and growing, sustainable dividends.

However, there’s also an array of less-known dividend payers that can pack a healthy income punch for retirees. Let’s have a look at four such companies that retirees should give serious consideration to.

Iron MountainNearly all retirees are familiar with tech giants like IBM, but bring up the name Iron Mountain(NYSE:IRM) and you’re liable to lose a few hairs scratching your head. Iron Mountain is a technology company that works with a host of enterprise customers across a number of sectors to provide data backup, information management, and document management services.

Image source: Iron Mountain.

What makes Iron Mountain such an intriguing option is that it converted to a real estate investment trust, or REIT, in 2014, meaning that it receives preferential tax treatment on its profits in exchange for paying out 90% or more of those profits annually as dividends. Best of all, REIT payouts occasionally qualify for preferential tax treatment that lowers an investors’ cost basis, meaning some retirees could actually get to keep more of the income they receive.

Iron Mountain delivered 4% storage rental growth in 2015, has had a compounded annual growth rate of 4.4% since 2011, and looks poised to continue capitalizing on an increasingly digitized and data-filled world. The company still believes there’s a large untapped market for storage rental and document management in North America and most emerging markets, meaning its 5.3% dividend yield could be a nice addition to retirees’ portfolios.

Compass Diversified HoldingsEveryone is familiar with conglomerate Berkshire Hathaway, which is led by the most famous of all investors, Warren Buffett; but just how many of you recognize this conglomerate: Compass Diversified Holdings(NYSE:CODI)?

Image source: Ergobaby.

Compass has a diverse array of assets under its corporate umbrella. Through acquisitions and middle-market investments, it now has eight subsidiaries, including Clean Earth, which handles environmental services; Manitoba Harvest, which manufactures hemp-based food products; Advanced Circuits for small-circuit board production; and Ergobaby, a company that provides baby-related products. The advantage of having a variety of consumer, tech, and financial-based products and services is that it minimizes the chance of a recession really hindering Compass’ top- and bottom-line. It also allows Compass to profit from the disposition of acquired assets that have increased in value.

In 2015, it experienced a big jump in operating cash flow to $82.4 million, up from $58 million in 2014, and it paid $0.36 per quarter in dividends to investors, bringing its total dividends paid to investors since its May 2006 IPO to more than $13 a share! It has paid $1.44 annually in each year since 2011, placing its current yield at a whopping 9%. That’s a number retirees can wrap their hands around and never let go.

FLY LeasingMost income investors who want a “high-flying dividend” head to Boeing with its sturdy 3.2% yield; but fewer are aware of small-cap dividend juggernaut FLY Leasing(NYSE:FLY).

Image source: Pixabay.

FLY Leasing’s business model is genius, and it tends to work in any market environment, regardless of whether jet fuel prices are soaring or falling. FLY purchases aircraft, then leases its planes to commercial airlines for intermediate to long periods of time. When those contracts expire, FLY looks to book gains by selling its used aircraft. This method tends to work wonders because FLY’s fleet is relatively young (6.6 years as of the fourth quarter of 2015), meaning its engines are fuel-efficient and its cabins have the latest gadgets for passengers, and airlines often have little desire to spend billions ordering new planes. Leasing is so much cheaper and provides less strain on their often burdened balance sheets.

It is worth pointing out that FLY is currently in talks with the Securities and Exchange Commission about the way it accounts for intangible assets, which may lead to a possible restatement of its financial reports. However, I don’t view this outcome as an investment-altering event, because its quarterly payout of $0.25 per share should remain intact. This works out to a meaningful dividend yield of 8.5% for investors.

Citizens & NorthernFinally, dividend investors often flock to banking names like Wells Fargo, but few have heard of Citizens & Northern(NASDAQ:CZNC), the parent company of Citizens & Northern Bank, which operates 26 consumer and commercially focused branches throughout Pennsylvania and southern New York.

Image source: MyFuture.com via Flickr.

Like most banks, Citizens & Northern relies on the bread and butter of banking to drive growth: loans and deposits. C&N grew its net loans outstanding by a healthy 11.7% year-over-year to $693.9 million. Leading the charge was growth of 20.8% in commercial loans, heralded by a continued low-yield environment. Deposits shrank 2% from the year-ago period to $963 million, but this seemed to have more to do with an impasse concerning the Pennsylvania state budget than an actual shift in consumer and commercial deposit habits.

In addition, C&N has been an active repurchaser of its own common stock. Its board authorized the purchase of up to 5% of its outstanding common stock in July 2014, and in April 2016, it completed the remainder of its buybacks. It sports exceptionally low volatility and a current dividend yield of 5.2% that appears to be fairly conservative, so retirees would be wise to give this under-the-radar regional bank a closer look.

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